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tsu doh nimh writes "State authorities in Florida on Thursday announced criminal charges targeting three men who allegedly ran illegal businesses moving large amounts of cash in and out of the Bitcoin virtual currency. Experts say this is likely the first case in which Bitcoin vendors have been prosecuted under state anti-money laundering laws, and that prosecutions like these could shut down one of the last remaining avenues for purchasing Bitcoins anonymously."

I would make a case for entrapment. If anyone comes to you and says something along the lines of, "I've got some drug money to launder, I need $30,000 in bitcoins..." don't say yes. I mean, Jesus Christ, how fantastically stupid do you have to be to go for that?! Still, law enforcement is breaking the law when they create crimes to arrest people for. Beyond that, unless they're going to make private money transactions illegal, this case doesn't really mean anything for the bigger picture.

Yeah I agree. It should mpt be a crim for people to do what they wish with their money. So unless they willingly take in money they knew was from drugs or something ilegal then there should NOT be a case.

It depends on how law enforcement first came into contact with those that were arrested. The article is somewhat ambiguous about how these guys came to the attention of law enforcement. It does appear that the only real crime these guys committed was being "unlawful money transmitters", which seems like a crime that should not exist to me. When the undercover agent told them that they wanted the bitcoins in order to do something illegal, they should have told them, "Sorry, I will not do business with you." Not because I think that they should legally have to care, but because people who genuinely want bitcoins to do something illegal are not likely to tell you that. This suggests that the person who is telling you his reasons is something other than someone who wants to conduct a transaction. It also seems likely that the reason they presented that they wanted to use the bitcoins for something illegal was because they doubted a jury would have convicted the men on the "unlawful money transmitters" charge.

Ultimately, I do not know if this was entrapment by the legal definition, but it does seem like a waste of law enforcement resources.

If anyone comes to you and says something along the lines of, "I've got some drug money to launder, I need $30,000 in bitcoins..." don't say yes. I mean, Jesus Christ, how fantastically stupid do you have to be to go for that?!

On the other hand, one has to be fantastically naive to expect a similar magnitude of business from people who only want to buy a cup of coffee at Starbucks. BTC attracts criminal proceeds like honey attracts flies. In essence, there is hardly any legal use of BTC (outside of pure

Still, law enforcement is breaking the law when they create crimes to arrest people for.

This is beyond stupid.

The elements of the crime of money laundering are set forth in the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances and Convention against Transnational Organized Crime. [2000] It is defined as knowingly engaging in a financial transaction with the proceeds of a crime for the purpose of concealing or disguising the illicit origin of the property from governments.

Still, law enforcement is breaking the law when they create crimes to arrest people for.

It happens all the time, the best example being the "To Catch a Predator" type stings. Law Enforcement create a situation, a honeypot if you will, and waits for the flies. Fake pawn shops for fencing stolen goods is another example. Cops have also been known to encourage murder-for-hire in domestic situations like messy divorces.

But like this Bitcoin thing, "entrapment" is not legally defined the way most people suppose it is... In criminal law, entrapment is when a law enforcement agent induces a person to

It means that the federal government is serious about treating bitcoins as a real currency. Which means that if you're an exchange you better file suspicious activity reports and comply with all the legislation and if you're an individual you better pay taxes on whatever you own. It's going to be incredibly difficult to convert bitcoins from anything like silk road into US dollars because you're going to get reported to the government at some point along the way.

Once you have bitcoins, it's not hard to transfer them to another address. Who owns that address? Consider also coin tumblers and similar schemes. This is what laundering is about after all. Moving money around to disguise its provenance.

Still, who would use Bitcoin when you can just launder your money through a large bank who will only receive a slap on the wrist when caught?

Once you have bitcoins, it's not hard to transfer them to another address. Who owns that address? Consider also coin tumblers and similar schemes. This is what laundering is about after all. Moving money around to disguise its provenance.

Money laundering is not about hiding the fact that you have money - because you could just bury it in a chest somewhere, or in a case of Bitcoin receive it in a new adress - it's about providing a legitimate-looking origin for what you use. Coin tumblers don't help with th

If someone comes up to your business and says "hey i'm going to use this for illegal purposes", and then you agree to accept the money, you're in violation of several laws. RICO is one, and so is money laundering in some cases. His biggest mistake was at the point when they said what they were going to use the money for, in this case to buy stolen credit cards online, he accepted the deal and continued working with them. He should have said that he doesn't do anything illegal and not dealt with the potential customer at that point. That would have shielded him from liability.

His biggest mistake was not being politically connected, like HSBC, where they have laundered money for drug dealers and terrorists. They just got a slap on the wrist with a fine. There are two classes of people in America, those who are politically connected, and are immune to jail time, and the rest of America, who are bound to infinite arbitrary laws which are selectively enforced.

The Hongkong and Shanghai Banking Corporation (HSBC) was founded by a Scotsman in 1865 to take advantage of the opening of trade with China, including the opium trade. They have been laundering money for drug pushers from the start, back when the British were the drug pushers.

No, Bitcoin is actually very close to their wet dream; they just need a little additional legislation:

* Require that each bitcoin wallet is registered with the owner's name at some government agency and make it a crime to use unregistered bitcoin wallets* Make it a crime to use or provide mixing services (possibly already covered by money laundering laws)

That way, they'll have what they dream of: A complete record of every single transaction a person makes. The bitcoin protocol gives them the wallet numbers

Bills have serial numbers. How hard do you think it is to have ATM's scan serial numbers on the bills they dispense so the machine/bank/gov't knows who they were given to, and have the bank scan in the deposits so they know who is receiving the bills? Not hard at all. I'm not saying it's actually being done - at least for smaller denominations, but implementation is trivial considering how everything is automated nowadays. Oh it wouldn't be a perfect system, there would still be a gap before a bill is put i

I have had that same thought. I'm sure ATM's could record the numbers, as well as the counting machines that are used when you bring in lots of bills to the bank.

My old bank put in an automated counter that dispensed your with withdrawal to the teller, and it didn't give me the correct amount and the cashier called in back and they verified the transaction and gave me my missing money.

I asked her previously why they didn't count the money back when they gave it to me out of the machine, and she said they di

Bills have serial numbers. How hard do you think it is to have ATM's scan serial numbers on the bills they dispense so the machine/bank/gov't knows who they were given to, and have the bank scan in the deposits so they know who is receiving the bills?

It wouldn't be hard, but they aren't doing it. Most money just comes in and then goes out again without being scanned at all.

How hard do you think it is to have ATM's[sic] scan serial numbers on the bills they dispense so the machine/bank/gov't knows who they were given to, and have the bank scan in the deposits so they know who is receiving the bills?

Off the top of my head it would require

- Replacing evey dispenser mechanism in every ATM

- Replacing evey depository mechanism in every ATM that accepts cash

- Updating the communications protocols between the components within the ATM

- Updating the SNMP code for the ATM to central to support the new device

- Updating the transaction protocol between the ATM and central to support reporting which bills were dispensed or deposited

- Updating all of the protocols used by all of the debit networks to pass that i

How often do you deposit cash? Whenever I receive cash in change from a transaction, I usually respend it. And the cash I receive in change isn't coming straight from the bank either, it's from someone else's pocket. Unless there is a mandate to track all cash transactions, even between individuals, then there's not much point in tracking at all.

This is something the voters in a democracy need to decide. Do they want it to be possible to conduct large anonymous transactions or not. There are advantages and disadvantages to either choice. The technology is almost irrelevant, what matters is the desired outcome.

For the people who argue that voting doesn't matter, that the government is controlled by non-democratic entities, then there isn't much to do, since then those entities will decide what they do or don't want. Again the technology really isn'

The "barter system" doesn't scare anyone because on a macro scale it doesn't work and never has. The fact that it doesn't work is entirely why currency was invented in the first place, nothing to do with taxes, taxes existed just fine in pre-currency economies, they just required your labour or the fruits thereof rather than cash.

Leaving that aside, Bitcoin isn't a barter system, it's a currency just like US dollars. It's a deflationary currency with huge privacy and security issues, but it's still a curren

You're not far off, but it's more accurate to say cash is a representation of value.

The problem with traditional barter is that it becomes difficult if not impossible unless both parties have goods of roughly equivalent value that they both want to exchange. I'm not going to trade my house for a haircut, but the hairdresser still needs a house. Instead of going through a few dozen trades to convert what people traded for hair cuts into something worth enough to trade for my house that I actually want, we us

The haircut to token exchange rate is determined by the market, which is actually what makes money interesting. When you barter directly the market which determines the value of your goods is very small. Essentially it's the value of the good or service you have to trade to the person who has the good or service you want. This is seriously distorting. For example if you're a hog farmer and the person you're trying to trade with is Jewish or Muslim, you're broke even if you own a million hogs.

... why, if news stories are any indication, there seems to be such a high percentage of money laundering activity or the like compared to what happens with other forms of currency?

This is a sincere question... not a challenge to the usefulness or benefits of bitcoin, but just a question that, if bitcoin is to really have any kind of future, I think that people who *are* law abiding and might want to use it someday really need to understand.

I'm not a Bitcoin advocate.. At least, not of the currency - the technology is marvelous, however. Nevertheless, here's a shot at answering your question...

I think one of the issues here is that it concerns a very specific type of money laundering - if it can even be called that.

Basically the seller is acting as a money services business, without being licensed to do. As such, they do not formally have AML (anti-money laundering) and KYC (know-your-customer) compliance anywhere on their radar. That, in turn, can lead to the actual money laundering allegation.

I say allegation, because there's no 'money laundering' going on when you decide to sell your PS3 for $100 to buy some BTC with that somebody just mined on their rig. Nowhere in that entire exchange chain would there be an illicit aspect.

That explains one aspect of why 'money laundering' seems to pop up relatively often.

Another aspect is that you, me, and everybody can fairly easily buy, and sell, Bitcoin to whoever we want. If you want to buy Euros, you'll have to go to an exchange bureau. If you want to sell them again, you'll have to go to an exchange bureau. Those are, of course, licensed money services, but there's also far fewer of them - generally only at major international ports (be that airport or seaport and maybe the odd exchange bureau at border towns).Loosely tied into this is the fact that in the U.S. you really don't have much use for alternative currencies. Sure, you can buy some Canadian dollars or some Pesetas. But why would you, unless you were to go to those countries? You can't exactly spend it at a website. With Bitcoin, you can. So there's far fewer such exchanges occurring 'in the wild' to begin with.

And, lastly (well there's a few more, but I see these as the major ones) - well, let's face it.. Bitcoin em used for quite a few illicit purposes. Be that the well-known Silk Road aspect, or people in other criminal circuits trying to look clean, or even just people who want to hide some of their money from the IRS.

Oh, and also, it's actually a fair bit easier to identify the parties in these cases. If you're a major Bitcoin exchange, you undoubtedly have a business address or have some other way to be found. If you're a user of localbitcoins.com then you can simply be invited for an exchange and could be arrested on the spot. Finding out money laundering operations, locations, etc. in the traditional movie-/TV-show-popularized sense is, quite frankly, a lot harder.

However, for the latter, it seems as though you in fact run afoul of some laws, depending on state, etc. See also a comment of mine further down.

Businesses accepting non-local currency is a bit different, as they tend to sell goods - rather than another currency. However, that prompts further questions again which...is also in that other comment:D

Regular currency has controls that generally prevent large amounts of it from being spent conveniently without entering the banking system and thereby being trackable (for plenty of good reasons for government -- the money's harder to hide from taxes, illegal ventures become less profitable for criminals, etc.) Bitcoin doesn't have these controls.

As a Bitcoin advocate, I think it's more likely that people fear what they don't understand. There's this new thing out so people (news services) are looking for the scary stories. Criminal activity in Bitcoin usage is dwarfed by that in the USD, even proportionally

Basically, news stories are an indication of shit that sells news - and unsurpisingly, money laundering is one of those things. So news stories are biased. You mostly hear about the things which are crap, because they're "newsworthy".

My point is that you *don't* hear about those things as often as you do with bitcoin, and I was wondering why.

You probably do [michellemalkin.com], but you simply don't pay attention [wikipedia.org]. (Those examples are just from the top of a random Google search.) A bureaucrat takes cash bribe for a favor... stop the presses!

On top of that, I would think that a large number of cash transactions are successful, and invisible to the government. (All drugs are sold and resold for cash, modulo the extinct Silk Road.) The proceeds are then c

... why, if news stories are any indication, there seems to be such a high percentage of money laundering activity or the like compared to what happens with other forms of currency?

It only seems that way because when (several orders of magnitude more) money laundering happens on a regular basis involving any of the national currencies, it doesn't generally make the news, whereas anything involving bitcoins is apparently newsworthy—including some rather careless individuals getting arrested for knowingly participating in a crime which had very little to do with cryptocurrencies. (In this case the buyers reportedly said that they wanted the bitcoins for the purpose of buying stole

... why, if news stories are any indication, there seems to be such a high percentage of money laundering activity or the like compared to what happens with other forms of currency?

Suppose you created an easy to use and widely available barter system that the government does not yet know how to track. Doesn't it make sense that criminals would be some of the very first ones on the bandwagon? Normal currency has less money laundering as a percentage because everyone uses it, and the ratio of crooks to citize

Here's another question for you: why is "money laundering" illegal? Two people want to make an exchange, there is no victim.

Most of the money transfers which those laws are supposed to help catch are drug-related. If drugs are de-criminalized or legalized, can we get ride of the money laundering laws too and let innocent civilians do as they want with their property (until proven guilty of an actual crime)?

Money laundering is illegal because it is an activity that is used to disguise illegal activity. If there is no illegal activity, then even if the same types of monetary exchanges are occurring, they are not referred to as laundering, and the activities are not illegal.

Right, so you agree that the monetary exchange per se is not a crime. Only the crime should be illegal, not the monetary exchange. But anti-money laundering laws are targeting the monetary exchanges, not the crimes that are "disguised".
My point is simply that anti-money laundering laws break the presumption of innocence, as they assume that you have a certain type of monetary exchange, then you must be disguising a crime. It does not matter that there is no evidence of an actual crime.

Essentially up until fairly recently Bitcoin wasn't considered a "real" thing of value by the US government, which means that bitcoin exchanges weren't required to submit any of the kind of documentation that a bank or forex market would be required to. Specifically in relation to this case, suspicious activity reports. The drastic fluctuations in pricing also made it particularly easy to hide ill gotten gains. Essentially it was under regulated and vastly unstable which made it perfect in a lot of ways for

Essentially up until fairly recently Bitcoin wasn't considered a "real" thing of value by the US government, which means that bitcoin exchanges weren't required to submit any of the kind of documentation that a bank or forex market would be required to.

Uh no. And also no. Up until fairly recently, the US government had not made any formal announcement that Bitcoin was considered a real thing. That is however entirely different from your statement. Under the law, if it looks like a bank and smells like a bank then it's required to be a bank and do the things that banks have to do. However, only banks are required to do bank-style reporting. Other agencies which handle large amounts of currency, like casinos, are also required to do similar reporting, but i

That's sort of a bit open to interpretation. A bitcoin exchange only looks and smells like a bank if you consider bitcoin to be a currency and it was unclear whether the government saw it that way. You can buy and sell WoW gold for cash for instance but that most certainly isn't considered a currency and Blizzard isn't a bank. Exchanges probably should have been doing this stuff, but they weren't and no one was being or has been charged for activities prior to the announcement.

That's sort of a bit open to interpretation. A bitcoin exchange only looks and smells like a bank if you consider bitcoin to be a currency

If it's exchangeable to and from currency, then it's a currency.

You can buy and sell WoW gold for cash for instance but that most certainly isn't considered a currency and Blizzard isn't a bank.

If you operated an exchange in it, and performed transactions of any size, you'd see the same heat come down on you if it became a thing that might challenge the dominance of the USD in any way and to any degree.

As a non currency a Bitcoin exchange would have been legally liable to report any purchases of Bitcoins over $10,000, but unless they got caught under some sort of investment legislation that would have been it. Regardless of what they should or shouldn't have been doing no one was doing anything about it so whether it was legislated de jure, de facto it wasn't.

As an aspiring operator of a currency exchange, anyone ought to know the laws they operate under, so that they can also operate within them. Only a completely disingenuous prevaricating bastard would try to claim that a bitcoin exchange was not a currency exchange by design and intent, and no judge and no jury will be impressed by such an argument. Bitcoin is by both description and definition a currency, and it has a more or less established exchange rate, which makes it trivial to assign a dollar value to

But lots of idiots thought exactly that which is the point. The money launderers knew better off course, but folks like Sheen quite obviously didn't follow the laws and were perfectly happy to facilitate crime even knowingly. This isn't about the legal status of bit coin it's about why there is so much illegal use of bit coin.
The answer to that is pseudo anonymity and poor reporting practices at the exchanges combined with high volatility to hide gains. It was easy and low risk to launder through bitcoin.

I see a lot of the comments so far are about how stupid it was to go through with the transaction after it was mentioned that the buyer was going purchase illicit material with it.

However, as I understand it from Krebs' post - and the Florida law in question - that doesn't necessarily factor into it. The law seems to state that as soon as you act as a money transmitter, and the exchange is between $300 and $20k within a 12 month period, without being licensed to do so makes you liable for a third degree felony.

Some questions I would have for a lawyer that actually knows the ins&outs of Florida state law in this field:1. Is the above, in fact, the case? I.e. are the charges on those accounts completely unrelated to the disclosure of what the purchased material (in this case, Bitcoin) would be used for?2a. Does that mean that the state of Florida sees Bitcoin as a currency?2b. If it does not, then how would this same law be applied to e.g. physical goods if used as a material for exchange (e.g. gold nuggets, diamonds, etc.)3. Would similar apply to a travelers going in opposite directions exchanging their currencies when the value exceeds $300 (something easily possible if you forget to empty out your wallet), rather than going through the official exchange bureaus at the airport (and incurring the rather hefty exchange fees)?

The reason it was stupid to go through with the transaction once it was mentioned that the buyer wanted to make the transaction in order to do something illegal is NOT because (or not just because) doing so made the other party complicit in the illegal behavior thus mentioned. The reason it was stupid is because when someone tells you that they want to buy something from you in order to do something illegal, it is likely that they are law enforcement attempting to catch YOU breaking the law.
In addition it

> act as a money transmitter, and the exchange is between $300 and $20k within a 12 month period

That's fascism for you, using cash was basically outlawed while you stupid americans were busy watching TV. $300 isn't even one Bitcoin. This effectively makes everyone who buys or sells bitcoins criminals - unless they get a "license" to do something which should be perfectly legal to do without a license in the first place.

The law seems to state that as soon as you act as a money transmitter, and the exchange is between $300 and $20k within a 12 month period, without being licensed to do so makes you liable for a third degree felony.

The federal rule is that any transaction intended to circumvent the reporting requirements will be treated as a cash transaction.

Some questions I would have for a lawyer that actually knows the ins&outs of Florida state law in this field:
1. Is the above, in fact, the case? I.e. are the charges on those accounts completely unrelated to the disclosure of what the purchased material (in this case, Bitcoin) would be used for?
2a. Does that mean that the state of Florida sees Bitcoin as a currency?
2b. If it does not, then how would this same law be applied to e.g. physical goods if used as a material for exchange (e.g. gold nuggets, diamonds, etc.)
3. Would similar apply to a travelers going in opposite directions exchanging their currencies when the value exceeds $300 (something easily possible if you forget to empty out your wallet), rather than going through the official exchange bureaus at the airport (and incurring the rather hefty exchange fees)?

I am anything but a lawyer, but TFA actually references the laws applicable to the case for everyone to read. If I read these laws correctly, then

1. Yes, you can not simply do trades between currencies or equivalent valuables without a license, and that license seems tied to stiff reporting rules as soon as higher values are involved

2. The law doesn't require that, it suffices if bitcoin is seen a payment instrument.

The new Slashdot design is based on Windows 8. That fact alone, even aside from the numerous usability issues, indicates that the new owners have no fucking idea in the world what they've acquired.

Slashdot is a technology site, a geek site, an open source site, a programming site, an Internet / Web advocacy site. But more than that, it is a Linux community site. It lives and dies by its community. That community, by and large, is made up of passionate Linux advocates who can be whipped into a frenzy at the mention of Microsoft, who think Bill Gates is the Great Satan, who sincerely believe in free and open source software, and who implement that passion in their lives, hobbies, and jobs. Sure, not everyone here fits the mold. But that's the core of the community.

As one single data point, I work on simulators in the aerospace segment. We develop and integrate specialized, whole-system, software-only simulators, supporting software development when the hardware has limited availability or hasn't been built yet. Our user community is not large, but includes key technical people at well known organizations. Like others we interface with, our work has gone from Windows and Linux in the beginning, to mostly Linux, plus Windows if we have to. That's how we like it. Linux works for us - it's developer friendly, it's rock solid, it's quite deployable, and it lets us do what we need to do. And a bunch of us come to Slashdot to catch the news on Linux and other geek-worthy subjects, and discuss it with others.

And now the owners, having acquired this rather unique and valuable site, want to make it into Windows fucking 8 - the friendly, cuddly, but unusable Fisher-Price operating system that represents everything we despise? The mind reels. You might as well just make it a SEO parking page for Microsoft.

Seriously, DICE, do not do this thing. I know you don't care about the history, community, or shared values of this site, but this move will destroy them, and take the site with it. It will become a ghost town, abandoned by its residents, only visited by tourists and people that got lost on their way somewhere else.

Stop spamming the boards with your irrelevant arguments. Beta is built on HTML5 and Javascript. It was designed in typical modern fashion with a focus on usability and responsiveness to various user agents. In no world does this have anything to do with Microsoft Windows 8 and Live Tiles. Beta is pretty fucking cool if you ask me.

and Florida’s anti-money laundering statutes, which prohibit the trade or business in currency of more than $10,000.

This is factually incorrect, The satute does not prohibit the transaction, it just requires reporting. This makes me believe that the dealer was charged under 869.102 which mentions "trade or business". Had it been 869.101 them the source of the money would have come into relevance.The money laundering statute, Title XLVI Chapter 869 section 102 [state.fl.us], is about reporting.

All persons engaged in a trade or business, except for those financial institutions that report to the Office of Financial Regulation pursuant to s. 655.50, who receive more than $10,000 in currency, including foreign currency, in one transaction, or who receive this amount through two or more related transactions, must complete and file with the Department of Revenue the information required pursuant to 26 U.S.C. s. 6050I., concerning returns relating to currency received in trade or business.

If the bitcoin seller did not collect enough information to fill out the form and report the transaction so he was arrested. Th

No - if you pay 10 bitcoins in and get 10 bitcoins out, the fact that they may not be the same bitcoins isn't going to confuse anyone. If you've logged everything, as you suggest, this is going to be transparent.

Does it avoid anti money laundering ("AML") legislation?

No - AML legislation makes it an offence to attempt to hide the source, ownership or control of funds. Running this scheme would be an offence in itself.

1. They know you got paid by SOMEONE or paid SOMEONE but not who or for what or by whom.

2. As to the anti laundering people... its all about how you randomly exchange the bitcoins.

Provide a place where people can swap bitcoins with anyone. Then let nature take its course. The bitcoins are inherently decentralized so it won't take much and your involvement doesn't have to be direct. As such they won't be able to hold anyone responsible.

3. There are many forms of payment. The trick is to avoid dollars. The wh

Agreed. A few graphical updates.... i trust functionality will remain the same, why would it change? for profit? seriously, explain please.... Still, i get it. I bitched and moaned about google a few years back - to no avail of course. but let it go already people please!

No, people with a dictator complex like the thought of creating something unaccountable to government, i.e. unaccountable to the people.

Not everything need be accountable to government or the people they represent. Very little would be legal and no one would be free under such a system. It's the height of hypocrisy to suggest the free actions of consenting adults is somehow indicative of a dictator complex. Projecting much?

While I don't have a problem with the government managing and regulating a currency on behalf of the people they represent, in a free society, government should not have a monopoly on currency, outlawing all other forms.